Don’t Overlook These Details Before Your Appraisal
Appraisals are conducted to determine the fair market value of your home. In terms of refinancing, the home appraisal process happens between the loan application process as one of the requirements and the final approval. In the buying process, it occurs after the seller accepts an offer and work with the lender has started.
Many homeowners worry that their appraisal will bring in a lower-than-expected value, which will affect their financial plans. To prevent this from happening to you, have all the basics working properly, but also pay attention to smaller details. In the whole process, you may overlook some things that have an impact on the final value.
Understand Why Appraisals Are Required
To get the best home appraisal and, therefore, the expected value you want, you first need to know why appraisals are required. Once you know this, you can start to look at things from different perspectives to make sure all your bases are covered, and you are as ready as can be for the appraiser to conduct the assessment of your home.
Appraisals Protect The Lender
Appraisals are commonly thought of as a way to protect the buyer from paying a value much higher than the home is worth. This is partially correct, but the primary purpose of an appraisal is the protect the lender. Lenders are taking a huge risk when they provide a mortgage loan, and an appraisal helps soften that risk. Without a professional appraisal, the lender may end up loaning more than the home is worth. If the owner defaults on that loan, the lender’s losses are enormous and very difficult to compensate for.
Appraisals Help With Home Improvement Plans
Although appraisals are most often done during a real estate sale or when applying for refinancing, they can also be done to gauge what kind of improvements you can make to increase the home’s value. This is great if you plan to sell your home and renovate to get a better price point. In this case, you can seek a professional appraiser’s expertise to find out what your current value is and what the estimated value will be with the renovation plans you have.
A professional appraiser will also be able to tell you what repairs need to be made and which improvements to focus on most. All this works towards getting the best value for your investment. Once your home is ready to be presented in the market, you can expect to get the price you want.
There Is A Standard Form To Complete
When an appraiser evaluates your home, it can seem like they are making things up as they go, but the truth is there is a standard form they follow with a set checklist of home appraisal value factors. In the United States, they use Form 1004 or the Uniform Residential Appraisal Report by Fannie Mae. Consider this form as a summary of your home’s characteristics, features, history, and location.
It More Than Your Home
In relation to the last section, home appraisals are more than just about your home. Aspects like the neighborhood characteristics and the reliability of local utilities are also taken into account. While the overall look and appeal of your home do play a part, other things that are considered are:
- Market Value of other homes in the area
- Zoning classification
- Public and private improvements to common areas
- Proximity to high-value areas (cities, schools, shopping centers)
Since there are so many aspects to consider, subjectivity does sometimes creep in. A professional appraise can judge a home based on current standards, so they need to be an expert on the area and know it well.
Inspections Are Not Appraisals
Many people looking to buy or sell a home assume that an appraisal and an inspection are the same things, but they are not. A home inspection is a detailed summary of the current condition of your home. It is meant to protect a buyer from purchasing something that needs a lot of work. Home inspections look into the roof, floor, electrical, and plumbing aspects that can easily be seen. They also look into the foundation and the environment surrounding the house. In short, it is meant to see how much money it would cost to get things in proper working order.
An appraisal will also consider those listed above and the larger picture of things in terms of their worth. This is where the Uniform Residential Appraisal Report by Fannie Mae comes in.
It’s All About The Current Condition Of Your Home
Homeowners sometimes think that having their home appraised while being improved or renovated will speed up the selling process. On the contrary, this approach ends up giving you a lower result despite what you might think. The best thing to do is wait until everything is done so you can get the accurate and official asking price, one that you can be happy with.
Though this may mean that it will take longer to sell your home, in the long run, it is a better deal than settling for much less than what you wanted. Especially since you invested in making those improvements.
Understand what an appraisal is for, and the components that make up the home appraisal value factors will make things less stressful on your end. Knowing that your financial future hinders on the value you get can be daunting, but having all the right information makes the whole home appraisal process more comfortable to deal with.
Details Home Owners Overlook For Their Appraisal
If you are really looking to get the best value on your home appraisal, every little detail counts. Some factors, like the neighborhood characteristics and zoning classification, may be out of your hands. However, there are still things you can do to raise the value. If you are looking to sell, you may want to consider these details if you plan on renovating.
A Good Floor Plan Works Wonders
The style and layouts people prefer in their homes have changed a lot over the years. Buyers now like homes with open layouts where the kitchen is seamlessly connected with other rooms. The style of having walls separate rooms is no longer sought after. With that, you can consider knocking down a wall here and there during your renovation to make way for a breezier and wide-open space. Plus, this type of layout allows for more sunlight and feels more natural, making it work in your favor when putting your home up on the market.
Keep An Eye Out For Structural Issues
Indications of structural issues such as worn-out mortar between exterior bricks are a huge red flag for appraisers. This is because they are in the business of making sure the home is up for long term sustainability. Generally, lenders are unwilling to invest in properties if they believe there is a chance that its framework is not in good condition.
Going back to worn out mortar, this increases the chances of water seeping in. In colder areas, this can cause severe damage when the water freezes and expands. All this can eventually cause cracking, crumbling, and splitting of the walls. Make sure to address this when making your home improvements so you can avoid such issues.
Your Driveway Matters
A bumpy, cracked, or dirty looking driveway is always something worth fixing. Especially if you are surrounded by neighbors with pristine smooth driveways. Fixing this up during your home improvement will be in your best interest so you can reach the highest possible potential when it comes to your appraisal value.
Foul Smells Don’t Leave A Good Impression.
Many things can contribute to foul smells inside your home. While adding value to your life, pets may cause odors that will be unpleasant to potential buyers and appraisers. While the smell of your home doesn’t technically impact your appraisal’s final result, keep in mind that the person conducting the appraisal is human and is prone to subjectivity. The smell may cause them to rush the process and overlook the finer qualities that make your home unique and have more value.
Foul odors are really more of a distraction that takes away from getting the best results. So, even if it’s not on the list of factors, it can cause appraisers to overlook or miss certain things about your home just to rush out and get some fresh air.
Additional Structures Need Care Too
Your home can be in the best condition possible. However, if additional structures on your property like the garage, shed, and other outside buildings are not, this can still bring down your final appraisal value. Keep in mind that appraisers will also scrutinize these structures, and they will be included in the evaluation. To avoid letting these bring down your value, include them in your renovation plans as well. Repair them, so they are in good general condition and look appealing and clean.
What To Expect
As a homeowner, you will want to consider everything in this article before scheduling your appraisal. The goal is to have everything in the best condition possible, so nothing should be left unattended. Even the smallest of details can derail your appraisal as they can be signs of larger and more serious issues.
In terms of the home appraisal timeline, the process itself can usually be done in a couple of hours, depending on your home’s size. The evaluation and final report can be ready in about a week or less. This means, if you plan on getting your house sold as soon as possible, the appraisal won’t hold you back too long. Take the extra time to refine everything and get rid of any signs of neglect.